Congress Should Say No To NOPEC, Counterproductive Legislation Does More Harm Than Good
Congress wants to punish the Organization of the Petroleum Exporting Countries for soaring gas prices.
A bill, titled the “No Oil Producing and Exporting Cartels Act of 2021,” which goes by the acronym “NOPEC,” picks a legal fight with the cartel that’s been years in the making. By a 17-4 vote, the Senate Judiciary Committee backed NOPEC, resuscitating a bill that has always had political support in Congress, but has never gone anywhere.
Will things be different this time? Let’s hope not, because while NOPEC is undeniably feel-good legislation, it will do far more harm than good. The bill will not lower energy prices, and would effectively jeopardize U.S. energy security.
The bill aims to make cartel members vulnerable to antitrust litigation in the U.S. The idea, which has been beta-tested for decades, is to keep OPEC from limiting its output in order to raise prices. It does this by amending the Sherman Act to deny cartel members the sovereign immunity they would otherwise enjoy in a U.S. court. This would be an extraordinary step, one that is fraught with political and legal risks. What’s more, the betting is that it won’t work.
NOPEC has an intriguing lineage. In 2005, Sen. Frank Lautenberg, D-N.J., introduced the “OPEC Accountability Act.” The bill explained that rising gas prices put an “inordinate burden on American families” and would “hinder economic recovery.”
The remedy? In contrast to NOPEC, the “OPEC Accountability Act” called for a case against the cartel at the World Trade Organization. The argument was that OPEC’s production caps were export quotas that are illegal under WTO law.
Then as now, the “OPEC Accountability Act” has faced several problems. First, just a handful of OPEC’s 13 members belong to the WTO. When Lautenberg introduced his bill, the only ones that belonged to the institution were Indonesia, Kuwait, Nigeria, Qatar, the United Arab Emirates, and Venezuela. Saudi Arabia joined eight months after Lautenberg’s bill. Russia, which goes along with OPEC, didn’t become a member until 2012.
Second, even if the WTO found that OPEC’s production caps are illegal export quotas, the cartel might still prevail by using the exception on exhaustible natural resources. This was among the reasons the George W. Bush administration was cool to the idea, explaining it had “considered this before and remain[ed] of the view that under WTO rules filing a case cannot be an effective course of action.” The Obama administration didn’t warm to the idea. Nor did the Trump administration. By 2018, the bill was no further along.
Meanwhile, Congress opened a second front in its battle with OPEC. The “Gas Price Relief for Consumers Act of 2008,” which includes a section titled NOPEC, called for amending the Sherman Act. Then as now, this bill had its own problems.
One problem is that OPEC countries could retaliate by doing the same thing. Some of the cartel members are probably legally bound to do so. This would leave the U.S. exposed to litigation in foreign courts, and could profoundly impact the sale of U.S. commodities and energy.
Another problem is that, even if OPEC countries did not retaliate and did pump more oil output, NOPEC could still backfire. That’s because it would likely make U.S. production less price competitive, given that U.S. producers must adhere to higher labor and environmental standards, for example, whereas OPEC state-owned producers don’t share those same constraints.
OPEC is undeniably a juicy political target, but NOPEC, like the “OPEC Accountability Act,” gives the cartel too much credit. Tensions over output decisions, and price wars among the members and their allies, have long undermined OPEC’s ability to act in concert. It’s also not clear how NOPEC would be able to tell when the cartel is unlawfully holding back, as opposed to conserving in the short term for the sake of doing business in the long term.
The bottom line is that what NOPEC wants to do through antitrust laws is what the “OPEC Accountability Act” wanted to do through WTO litigation: namely, get OPEC to pump more. These efforts, while understandable, are not only risky, but unlikely to deliver on their promise. Instead, Congress should focus on increasing domestic production, and be consistent about it. That’s the more pragmatic way to reduce energy prices, rather than flawed legislation that aims at the wrong target.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University. Follow him on Twitter @marclbusch.
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